The Blog of Burgher Jon

YouTube (owned by Google) announced yesterday that they would be backing their most promising video creators financially (NYT).  Essentially, if you’ve been working in your spare time to build videos and people (as well as advertisers) have liked these videos, then YouTube might be willing to finance your next movie.  One interesting note is that according to the NY Times the grants will range in size from a few thousand to a few hundred thousand dollars.  This means that they’re not talking about buying a new flip camera for the guy who broke his when he wrecked his skateboard in to it; they’re talking about letting the guy who does skits with his friends lease a studio and hire a couple other actors.

Last week I wrote fairly disparagingly about Twitter’s @EarlyBird account.  My central contention with @EarlyBird is that Twitter is attempting to profit as a user of their own service.  This will hurt their service because it will destroy (since Twitter won’t allow it) a competitive landscape that might have yielded more intelligent ways to place advertisements.  So, when I thought about Google’s investment in YouTube auteurs, I asked myself, “is this the same thing?  Isn’t Google messing with the product that sits on the platform instead of restraining itself to the platform?”  The answer, in short, is no.

By way of an explanation, I’d like to use an analogy.  As I mentioned, both Twitter and YouTube have become valuable because they create platforms.  They are infrastructure, and others provide the content that leverages that infrastructure.  If they’re infrastructure, let’s make them the Pennsylvania Turnpike for the sake of this analogy.

What Twitter did by starting @EarlyBird and other such advertising users that will sit on their platform is open up a trucking company and disallow other trucking companies on the turnpike.  This sounds like a logical decision and in the short-term it may be very profitable.  It’s not a good idea though, imagine what will happen in the long run: Innovative new shipping concepts won’t be applied on the turnpike, people seeking to leverage these techniques will build a competing transportation method, business with the turnpike’s shipping company will decline until they would have been making more money with just tolls.  It will be too late at that point though; the alternative transportation that’s been set up will be superior to the reopened turnpike.

What YouTube is doing by funding content creators is opening up new roads.  YouTube is looking at the exits on the turnpike that are most used by truckers and saying, “What’s out there?  Would our customers benefit from creating an extension out in that direction?”  While this is not quite as bad as what Twitter is doing it still carries its dangers.  It’s still getting the infrastructure company in to the content creation business; YouTube will have to pick the content creators that get grants rather than letting the market do it.  I don’t think Google should do this unless they feel that YouTube as a platform is perfect and there are no additional infrastructure investments that need to be made.  This way, if the plan fails it won’t do so at the expense of other YouTube customers.